Asian Mid-session Market Update: China trade surplus shy of surplus despite smaller decline in imports; World Bank cuts global GDP target
***Economic Data***
- (CN) CHINA MAY TRADE BALANCE (USD terms): $50.0B v $55.6Be
- (CN) China Passenger Car Association (PCA): China May vehicle sales +11.4% y/y; YTD +7.7% y/y
- (JP) JAPAN Q1 FINAL GDP Q/Q: 0.5% V 0.5%E; ANNUALIZED GDP: 1.9% V 1.9%E
- (JP) JAPAN APR CURRENT ACCOUNT BALANCE: ¥1.88T V ¥2.30TE; ADJUSTED CURRENT ACCOUNT: ¥1.63T V ¥2.01TE; TRADE BALANCE: ¥697B V ¥919BE
- (JP) JAPAN MAY BANK LENDING (INCL TRUSTS) Y/Y: 2.2% V 2.2% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.2% V 2.3%E
- (AU) AUSTRALIA APR HOME LOANS M/M: 1.7% V 2.5%E
- (NZ) NEW ZEALAND Q1 MANUFACTURING ACTIVITY Q/Q: -2.6% V -2.3% PRIOR; VOLUME Q/Q: -1.2% V 0.8% PRIOR
- (KR) South Korea May Bank Lending to Households (KRW): 660.9T v 654.2T prior
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 +0.4%, S&P/ASX -0.1%, Kospi +0.1%, Shanghai Composite -0.4%, Hang Seng -0.3%, Jun S&P500 -0.1% at 2,109
***Commodities/Fixed Income***
- Aug gold +0.3% at $1,250/oz, Jul crude oil +0.4% at $50.54/brl, Jul copper +0.5% at $2.06/lb
- SLV: iShares Silver Trust ETF daily holdings rise to 10,535 tonnes from 10,491 tonnes prior; highest since May 5th
- (US) Weekly API Oil Inventories: Crude: -3.6M v +2.3M prior
- (CN) Platts China Oil Analytics: China Oil Demand in Apr fell 1.3% y/y
- (CN) China MoF sells 2-yr bonds at 2.563%, bid-to-cover 1.95x; 5-yr bonds at 2.774%, bid-to-cover 2.63x
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5593 V 6.5618 PRIOR
- (CN) PBOC to inject CNY55B in 7-day reverse repos
- (JP) BOJ offers to buy ¥450B in 5-10yr JGBs, ¥220B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr, and ¥25B in inflation-indexed JGBs
- JGB: (JP) China said to have bought a record amount of Japan short term debt in April - financial press
- (AU) Australia MoF (AOFM) sells A$1.1B in 5.75% 2021 Bonds; avg yield: 1.753%; bid-to-cover: 2.66x
***Market Focal Points/FX***
- Asian equity markets are mixed, echoing a pause in the rally for US indices, as investors look for fresh catalysts beyond the dovish Fed speak and the rebound in oil prices. While key US markets are near all-time highs, the recovery in labor has come under question and growth overseas has slowed. Today's assessment from World Bank demonstrates the conundrum - global GDP forecast for 2016 was revised down to 3.5% from 4.1%, US target cut to 1.9% from 2.7%, Japan cut to 0.5% from 1.3%, and China maintained at 6.7%. In its accompanying Global Economic Prospects report, World Bank notes "weakness in the global economy has persisted and risks have become more pronounced (as) divergence in economic conditions between commodity exporters and importers has widened." Among FX majors, USD was under modest pressure - USD/JPY fell as much as 60pips below 106.80, AUD/USD reversed initial drop to 0.7430, and NZD/USD rose about 50pips from the lows toward $0.70 level.
- China trade figures were similarly mixed. While the trade surplus was slightly below expectations, market reaction overall was somewhat positive on more constructive components. Exports decline of -4.1% was slightly less than expected -4.2% and the closely monitored Imports saw a much smaller decline of -0.4% v -6.8%e, indicative of recovering internal demand for materials. Recall that similar trends have been observed in exports data out of Australia. Also of note in China, a PBoC research paper maintained 2016 GDP target, raised CPI forecast from 1.7% to 2.4%, and warned about Export growth to forecast a decline of -1% vs +3% prior.
- In Japan, Q1 final GDP report confirmed the economy has averted a technical recession, though concerns remain that the impact of Kumamoto earthquake will plunge the country back into contraction. Japan's Q1 GDP components saw Private consumption rise 0.6% - up from 0.5%e and 0.5% prelim - while the CAPEX decline of -0.7% was worse than -0.4%e but up from -1.4% prelim. More skeptical analysts are quick to note that the data includes an extra Leap Year day, and growth would have been slower adjusted for that impact.
***Equities***
US equities / ADRs:
- PLAY: Reports Q1 $0.72 v $0.59e, R$262M v $251Me; Authorizes $100M share repurchase through FY18 (5.7% of market cap); Raises FY16 guidance; +4.8% afterhours
- PAY: Reports Q2 $0.47 v $0.53e, R$532M v $528Me; Cuts FY16 $1.85 v $2.23e, R$2.1B v $2.15Be (prior $2.21-2.24, R$2.15-2.17B); -27.6% afterhours
Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK -1.5% (May result); Xiao Nan Guo Restaurants Holdings 3666.HK -15.0% (acquisition); Chow Tai Fook Jewellery Group 1929.HK -2.4% (annual result)
- Financials: Central China Real Estate 832.HK +0.8% (May result)
- Technology: Beijing Baofeng Technology Co 300431.CN +1.0% (being rejected for asset acquisition plan); Screen Holdings Co 7735.JP +4.5% (Samsung said to consider bendable-screen phones); Fujitsu 6702.JP +1.4% (signs MOU with Box)
- Materials: Hanwha Chemical 009830.KR +6.2% (Q2 result speculation)
- Telecom: Spark New Zealand SPK.NZ -3.0% (in talks with Vodafone NZ for potential combination)